GNC 2008 Annual Report Download - page 97

Table of Contents
GENERAL NUTRITION CENTERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
subordinated to all the Company's existing and future senior debt, including the Company's 2007 Senior Credit Facility and the Senior Toggle
Notes and rank equally with all of the Company's existing and future senior subordinated debt and rank senior to all the Company's existing and
future subordinated debt. The 10.75% Senior Subordinated Notes are guaranteed on a senior subordinated non collateralized basis by each of
the Company's existing and future domestic subsidiaries (as defined in the 10.75% Senior Subordinated Notes indenture). If the Company fails
to make payments on the 10.75% Senior Subordinated Notes, the notes guarantors must make them instead. Interest on the 10.75% Senior
Subordinated Notes accrues at the rate of 10.75% per year from March 16, 2007 and is payable semi-annually in arrears on March 15 and
September 15 of each year.
The Company may redeem some or all of the 10.75% Senior Subordinated Notes at any time after March 15, 2009, at specified redemption
prices. At any time prior to March 15, 2009, the Company may on one or more occasions redeem up to 50% of the aggregate principal amount
of the 10.75% Senior Subordinated Notes at a redemption price of 105% of the principal amount, plus accrued and unpaid interest (including
special interest, if any) to the redemption date with net cash proceeds of certain equity offerings if at least 50% of the original aggregate
principal amount of the 10.75% Senior Subordinated Notes remains outstanding after the redemption. If the Company experiences certain kinds
of changes in control, it must offer to purchase the 10.75% Senior Subordinated Notes at 101% of par plus accrued interest to the purchase
date.
The 10.75% Senior Subordinated Notes indenture contains certain limitations and restrictions on the Company's and its restricted
subsidiaries' ability to incur additional debt beyond certain levels, pay dividends, redeem or repurchase the Company's stock or subordinated
indebtedness or make other distributions, dispose of assets, grant liens on assets, make investments or acquisitions, engage in mergers or
consolidations, enter into arrangements that restrict the Company's ability to pay dividends or grant liens, and engage in transactions with
affiliates. In addition, the 10.75% Senior Subordinated Notes indenture restricts the Company's and certain of the Company's subsidiaries'
ability to declare or pay dividends to the Company's stockholders.
In accordance with the terms of the 10.75% Senior Subordinate Notes agreement and the offering memorandum, these notes were required
to be exchanged for publicly registered exchange notes within 210 days after the sale of these notes. As required, these notes were registered
and the exchange offer was completed on September 28, 2007.
The Company expects to fund its operations through internally generated cash and, if necessary, from borrowings under the amount
remaining available under the Company's $60.0 million revolving credit facility. The Company expects its primary uses of cash in the near future
will be debt service requirements, capital expenditures and working capital requirements. The Company anticipates that cash generated from
operations, together with amounts available under the Company's revolving credit facility, will be sufficient to meet its future operating
expenses, capital expenditures and debt service obligations as they become due. However, the Company's ability to make scheduled payments
of principal on, to pay interest on, or to refinance the Company's indebtedness and to satisfy the Company's other debt obligations will depend
on the Company's future operating performance, which will be affected by general economic, financial and other factors beyond the Company's
control. The Company believes that it has complied with the Company's covenant reporting and compliance in all material respects for the year
ended December 31, 2007.
Predecessor Debt:
Senior Credit Facility. In connection with the Acquisition, the Company entered into a senior credit facility with a syndicate of lenders. Our
Parent and our domestic subsidiaries guaranteed our obligations under the senior credit facility. The senior credit facility at December 31, 2004
consisted of a $285.0 million term loan facility and a $75.0 million revolving credit facility. This facility was subsequently amended in
December 2004. In January 2005, as a stipulation of the December 2004 amendment, we used the net proceeds of their Senior Notes offering
of $145.6 million, together with $39.4 million of cash 93